Vaccines is Considered to Increase Investor Interest in Startups

Some studies predict funding to startups will decrease during the corona pandemic. However, the distribution of the coronavirus vaccine to the Omnibus Law or Cipta Kerja Law is considered to be able to boost investment in Indonesian startups in 2021.

NextLevel Leader PwC Indonesia Radju Munusamy assessed that investors will study the issues last year, including the Omnibus Law which is considered to make it easier for startups to develop business. “At the same time, startups need funding to scale up,” he said at the PwC NextLevel – 2021 Outlook: Start-ups, Investments, and Corporate Collaborations event, Tuesday (19/1).

The Omnibus Law on Cipta Kerja does contain regulations regarding startup companies, one of which is related to the recruitment of foreign workers. In Article 42 paragraph 1, it reads, “every employer who employs foreign workers is obliged to have the approval of the usage plan from the central government.”

Previously, companies had to have written permission from the minister or an appointed official. Then in paragraph 3, it is stated, the government adds parties who are free from the requirements as stated in paragraph 1.

Previously, this only applies to representatives of foreign countries who use workers from abroad as diplomatic and consular employees. Apart from the Omnibus Law, investors are reviewing the trend of consolidation to IPO initial public offerings by startups.

Investors will Consider Vaccine Distribution

This year, investors will consider distributing the coronavirus vaccine. On January 3 and 4, there were 714,240 vials of the Sinovac Covid-19 vaccine distributed to 32 provinces in Indonesia. Meanwhile, the other two provinces are West Sulawesi on January 5 and West Java on January 6.

“This trend will have a positive impact. Startups can restart (their business) to grow,” said Radju. Even so, investors will still analyze startups that are considered potential. East Ventures partner Melisa Irene sets a number of criteria for startup companies that will be given funding this year.

“Startups must be able to carry out risk management during a pandemic and innovate to survive,” said Melisa. Previously, CEO of Mandiri Capital Indonesia Eddi Danusaputro said that investors’ interest in investing in start-up companies remained high despite the corona pandemic. Available capital or dry powder is abundant.

“But we have to find a sector that is relatively resilient in this situation or not,” he said, last month (7/12/2020). In addition, investors have begun to focus on investing in startups that have a clear path to profit.

“Many investors have also switched to the later stage, because they are looking for a more stable or less risky business, aka it has been tested,” he said. The later stage is an advanced funding round such as series B and above. At this stage, usually startup products have been accepted by the market.

The Startup Sector that Investors are Interested In

Investors, including venture capitalists, estimate that five startup sectors will be flooded with funding this year. The startup fields in question are financial technology (fintech), health (healthtech), education, logistics, and e-commerce.

East Ventures partner Melisa Irene said, fintech is considered potential because many people in Indonesia have not been touched by financial services. In addition, the use of its services has increased during the corona pandemic.

Apart from fintech, Melisa assessed that e-commerce startups will still be in demand in 2021. “This sector has been positively affected (the Covid-19 pandemic),” he said. Derivative sectors such as digitalization of shops or online to offline (O2O) are also attractive to investors. “Startups that support the supply chain are very attractive,” he said.

Moreover, according to research by Euromonitor International 2018, it shows that the majority of Indonesians, Indians and Filipinos prefer to shop at grocery stores. The logistics sector is in demand by investors. The development of e-commerce during the coronavirus pandemic is a positive sentiment for logistics startups.